Tuesday, May 17, 2011

Quite a fascinating article in Bloomberg, as it seems the recent clampdown on property in China has led many to head east (well .....to the "west") spiking the already red hot Vancouver housing market. One that already had the warning flags last summer. [Jun 30, 2010: BW - Vancouver, Canada: Housing Bubble North of the Border?] One (of a myriad) of reasons you could see the U.S. housing market getting out of control was the complete disassociation between median incomes and housing prices. [Dec 6, 2007: What Should Median Housing Prices be Today?] To say this has happened as well in Canada - and especially Vancouver - is an understatement. That said, they have the same very loose monetary policy, and an influx of buyers - many of them cash - from outside the country itself, so it is definitely setting up an interesting scenario. One wonders what happens when their central bank actually begins to raise rates in earnest.

At this point, using the measure above (median household income to median price), Vancouver is now more expensive than New York or London. And I am sure a lot less investment bankers work there, than in either of those 2 locales.

Some of the growth measures in this story seem nearly impossible - looks like some mass herding effect out of China and into Canada...

--------------

Vancouver's Royal Pacific Realty had such a surge of business during the first two weeks of Februarythat agents and assistants worked day and night shifts to find homes for Chinese buyers visiting during the Lunar New Year. “It was unprecedented,” said Royal Pacific Chief Executive Officer David Choi.

Sales of detached homes, townhouses and condominiums in metropolitan Vancouver jumped 70 percent in February from January, to 3,097 units from 1,819, and were up 25 percent from a year earlier. In March, sales climbed 32 percent from February. Sales increased by 80 percent from two years ago.

Buyers from mainland China are leading a wave of Asian investment in Vancouver real estate as China tries to damp property speculation at home. Good schools, a marine climate and the large, established Asian community as a result of Canada's liberal immigration policy make Vancouver attractive, said Cathy Gong, who moved from Shanghai to the Shaughnessy neighborhood on Vancouver’s Westside about three years ago.

China, where home prices rose 28 percent in Beijing and 26 percent in Shanghai last year, has taken steps to curb property speculation within its borders. Premier Wen Jiabao placed curbs on mortgage lending, boosted down-payment requirements and limited the number of purchases.

In 2010, Vancouver had the third-highest housing costs among English-speaking cities worldwide. Only Hong Kong and Sydney, another magnet of Asian immigration, were more expensive.

Vancouver’s median home price of C$602,000 ($618,000) was 9.5 times the annual median household income of C$63,100. Canada had a 4.6 national multiple, making it “seriously unaffordable,” while the U.S. at 3.3 was “moderately unaffordable,” the study showed. To be affordable, the multiple must be 3 or less.

Vancouver was more expensive than San Francisco, London and New York by that measure.

Unlike London or New York, “we don’t have enough jobs with high incomes to justify”the home prices, said Ladner. He noted Australia has placed restrictions on foreign home ownership.

Holidays in China have been a popular time to look for houses in Vancouver. Sales picked up in October during China’s weeklong national holiday, said Winnie Chung, a Royal Pacific agent who represented buyers or sellers in C$285 million of home sales in 2009 and 2010 combined.

Mainland Chinese are buying houses primarily in Vancouver’s Westside, boosting the median sales price to C$2 million in the district known for its wide boulevards, beaches, expansive parks and stucco Tudor mansions.

“Our office has done 50 sales this year, which is pretty incredible,” said Vancouver realtor Tom Gradecak at his office in Point Grey, where he has one colleague who speaks Mandarin and Cantonese and is hiring a second. “Half of those sales are from mainland China.”

Some buyers acquire multiple homes, one to live in and others for investment, said Chung, the broker. Her clients made their money in a variety of businesses, she said, including mining, stainless steel manufacturing and real estate. About 10 percent of them speak English, she said.

Westside home prices rose 77 percent during the past five years through April amid the housing collapse in the U.S.

In 2010, the average home price in greater Vancouver rose 14 percent from 2009.

The current group of Chinese homebuyers in Vancouver is the third “wave” from Asia since 1990, following Taiwanese and Hong Kong immigration, said Manyee Lui, a veteran Vancouver realtor. “People from mainland China are the new immigrants,” Lui said.

Chinese buyers frequently are absentee owners, wealthy businessmen who buy second or third houses for their wives and children while continuing to live in China for work. “You see a lot of these satellite families,” said Chow. He said it’s not unusual to see college-age kids of wealthy Chinese parents driving Bentleys, Maseratis and Porsches around the Westside.

Low interest rates inflated home prices and created a bubble, said Lawrence Wong, an immigration lawyer with many Chinese clients. “There is this psychological fear that ‘Ok, if I don’t get into the market, I might not be able to get in later on,” said Wong.

Fun random fact....

Starting about 18 months ago, so many homeowners applied to change the last two digits of their addresses to remove or shift the number 4, which in Chinese sounds like the word for death, or add the numeral 8, which is considered lucky, that Vancouver began turning down some requests, said Bonnie Lee, addressing coordinator for the city.

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions. This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.